Tullow Oil, the FTSE 100 exploration and production company, fell 5% on talk that it might be about to unveil a share placing.

The company has announced several oil discoveries in Ghana and Uganda, and analysts said it would make sense for Tullow to raise cash to help develop them. The company is due to issue a trading update tomorrow, and one trader said:

"There was always a possibility they would ask for money, although it could just be that people realised there was an update tomorrow and put two and two together."

A company spokesman refused to comment, as did Tullow's broker. Tullow's shares closed 32p lower at 600.5p.

But the banks were again the dominant feature of the day, with Lloyds Banking Group losing 20.2p to 44.8p on worries it could end up being nationalised by the UK government. Barclays fell 15.1p to 72.9p, while Royal Bank of Scotland, hit hard yesterday, saw an early bounce peter out and closed down 1.3p to 10.3p. A couple of new short disclosures were issued, with Landsdowne Global edging its bearish position in Barclays up from 0.25% to 0.26% and Paulson declared a 0.79% short in Lloyds.

Talk that ratings agencies were nervous about UK debt levels given the amount the government is already pouring into the banks did not help overall sentiment, nor did another slump in the pound. Wall Street, closed yesterday for Martin Luther King day, celebrated Obama's big day by falling sharply. The Dow Jones Industrial Average was down around 140 points by the time London closed, while the FTSE 100 finished down 17.07 points at 4091.4.

So with the banks under the cosh, many investors turned their attention to more defensive sectors.

British American Tobacco closed 39p higher at £18.44 while pharmaceutical stocks were also in demand for their safe haven qualities, their status as dollar earners when the pound is crumbling, and hopes that Barack Obama will boost spending on US healthcare now his inauguration has finally taken place. AstraZeneca added 45p to £28.05, helped by a positive note from Citigroup, while GlaxoSmithKline rose 16.5p to £12.94 and Shire climbed 14p to £10.20. Medical group Smith & Nephew, recommended by Exane BNP Paribas yesterday, closed 10.75p higher at 498p.

There were some positive movements among the mid-caps after trading updates, with pubs group JD Wetherspoon 40.75p better at 315p, spread betting group IG 31.75p higher at 254p and luxury goods group Burberry up 25.5p to 231.25p.

But downgrades from Credit Suisse hit property companies Brixton, down 14.5p at 105p, and Segro, 21.25p lower at 168.75p.

Chip maker Wolfson Microelectronics lost 5p to 72p after being fined £140,000 by the City regulator for not releasing price sensitive information about a contract in time. Dan Ridsdale at Teathers said:

"The fine on Wolfson may force chip companies to disclose material design losses and wins sooner. Even if the customer is undisclosed, such a move is unlikely to be popular with original equipment manufacturers who demand confidentiality verging on secrecy."

Meanwhile he repeated his positive stance on CSR - down 8.75p at 157.25p - predicated on news shortly that it may have won a significant deal from Nokia.